Related papers: The time interpretation of expected utility theory
We consider the problem of robustly maximizing the growth rate of investor wealth in the presence of model uncertainty. Possible models are all those under which the assets' region $E$ and instantaneous covariation $c$ are known, and where…
In this paper we study the dynamics and ergodic theory of certain economic models which are implicitly defined. We consider 1-dimensional and 2-dimensional overlapping generations models, a cash-in-advance model, heterogeneous markets and a…
We suggest employing log-ergodic processes to simulate the velocity of money in an ergodic manner. Our approach sheds light on economic behavior, policy implications, and financial dynamics by maintaining long-term stability. By bridging…
Modern portfolio theory(MPT) addresses the problem of determining the optimum allocation of investment resources among a set of candidate assets. In the original mean-variance approach of Markowitz, volatility is taken as a proxy for risk,…
We develop a theory of demand economics for an era of material abundance. The binding constraint on growth has shifted from insufficient aggregate demand to inadequate demand-tier upgrading. Our result is that, the new engine of growth lies…
One challenge in the estimation of financial market agent-based models (FABMs) is to infer reliable insights using numerical simulations validated by only a single observed time series. Ergodicity (besides stationarity) is a strong…
This article derives prognostic expressions for the evolution of globally aggregated economic wealth, productivity, inflation, technological change, innovation and growth. The approach is to treat civilization as an open, non-equilibrium…
Consider an investor trading dynamically to maximize expected utility from terminal wealth. Our aim is to study the dependence between her risk aversion and the distribution of the optimal terminal payoff. Economic intuition suggests that…
Many single-cell observables are highly heterogeneous. A part of this heterogeneity stems from age-related phenomena: the fact that there is a nonuniform distribution of cells with different ages. This has led to a renewed interest in…
Any firm whose business strategy has an exposure constraint that limits its potential gain naturally considers expansion, as this can increase its exposure. We model business expansion as an enlargement of the opportunity set for business…
We pursue an inverse approach to utility theory and consumption & investment problems. Instead of specifying an agent's utility function and deriving her actions, we assume we observe her actions (i.e. her consumption and investment…
We establish when the two problems of minimizing a function of lifetime minimum wealth and of maximizing utility of lifetime consumption result in the same optimal investment strategy on a given open interval $O$ in wealth space. To answer…
This paper studies a one-sector optimal growth model with i.i.d. productivity shocks that are allowed to be unbounded. The utility function is assumed to be non-negative and unbounded from above. The novel feature in our framework is that…
Rewards typically express desirabilities or preferences over a set of alternatives. Here we propose that rewards can be defined for any probability distribution based on three desiderata, namely that rewards should be real-valued, additive…
I show that if the capital accumulation dynamics is stochastic a new term, in addition to that given by accounting prices, has to be introduced in order to derive a correct estimate of the genuine wealth of an economy. In a simple model…
In the context of a large class of stochastic processes used to describe the dynamics of wealth growth, we prove a set of inequalities establishing necessary and sufficient conditions in order to avoid infinite wealth concentration. These…
We show in a simulation when economic agents are subject to evolution (random change and selection based on the success in the estimation of the result of the gamble) they acquire risk aversive behavior. This behavior appears in the form of…
Optimization and expansion are two modes of staged evolution of complex systems where macroscopic observables change at a decreasing, respectively increasing, rate. A prime example of evolutionary expansion, Gross Domestic Product (GDP)…
The stochastic processes underlying the growth and stability of biological and psychological systems reveal themselves when far from equilibrium. Far from equilibrium, nonergodicity reigns. Nonergodicity implies that the average outcome for…
Although financial models violate ergodicity in general, observing the ergodic behavior in the markets is not rare. Policymakers and market participants control the market behavior in critical and emergency states, which leads to some…